The Role of Profit Sharing in a Dual Labour Market with Flexible Outsourcing

Erkki Koskela and Jan König ()
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Jan König: Free University of Berlin

No 3876, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze the following questions associated with flexible outsourcing under partly imperfect dual domestic labour markets, where high skilled workers participate in firm's profit via profit sharing: How does the implementation of profit sharing influence flexible outsourcing? What is the relationship between outsourcing cost, profit sharing and wages? We show that profit sharing has a positive effect on low skilled wage and thus an outsourcing enhancing character. The wages of both types of labour are negatively correlated and lower outsourcing cost can increase the wage dispersion by decreasing the low skilled wage and raising the high skilled wage. The overall effect of profit sharing on high skilled wage is ambiguous due to a positive direct effect and a negative indirect effect via the low skilled wage.

Keywords: profit sharing; dual labour market; flexible outsourcing; labour market imperfection; employee effort (search for similar items in EconPapers)
JEL-codes: E23 E24 H22 J23 J51 J82 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-12
New Economics Papers: this item is included in nep-bec, nep-lab and nep-mac
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Related works:
Journal Article: The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing (2013)
Working Paper: The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing (2011)
Working Paper: The Role of Profit Sharing in a Dual Labour Market with Flexible Outsourcing (2009)
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